Holmans Top Tips

Key Changes to Superannuation Guarantee Payments

From 1 July 2026, employers will be required to make Superannuation Guarantee (SG) contributions on the same day they pay their employees' wages, a change commonly referred to as Payday Super. The SG contributions must arrive in the employees' superannuation fund within 7 calendar days of payday, or employers will face the SG charge. This shift comes as part of the Australian Tax Office’s (ATO) strategy to boost transparency and compliance by matching employer Single Touch Payroll (STP) data with superannuation fund reporting.

What Do I Need to Do?

Employers must ensure that:

1. SG contributions are paid alongside wages on ‘payday’ for all Ordinary Time Earnings (OTE) payments.
2. Contributions are received in employees' superannuation funds within 7 days of payday.
3. Governance and payroll systems are updated to handle this new requirement.

If these conditions are not met, the employer will be liable for the SG charge, even before the ATO issues an assessment. Delaying contributions beyond the 7-day window will increase the charge and penalties.

Are There Any Exceptions?

There are limited exceptions to the new rules:

• SG contributions for OTE payments made within the first two weeks of a new employee’s employment will have a deferred due date beyond this initial two-week period.
• Small, irregular payments made outside the regular pay cycle are not considered a payday until the next regular OTE payment occurs.

Why Is This Important?

Failing to comply with the new payday super obligations will expose employers to significant financial penalties, including the SG charge. Repeated non-compliance could result in the maximum administrative uplift of the SG charge, adding further financial strain on businesses.

However, employers that voluntarily disclose late payments will face reduced penalties under a streamlined ATO process. Correcting late contributions will also become easier, as contributions will automatically count towards the earliest possible payday that has not yet been assessed for the SG charge.

What Should I Do to Prepare?

Employers have until July 2026 to adjust their payroll systems to align with these new SG payment requirements. Businesses already paying SG contributions in line with wages will not be affected. For those needing to transition, it’s recommended to start making changes as early as possible to ensure a smooth transition.

Benefits of More Frequent SG Contributions

The shift to more frequent SG contributions will have several benefits:

• Simplified payroll management with fewer liabilities accruing over time, assisting with cashflow management
• A reduction in administrative burdens by avoiding the accumulation of unpaid super over long periods
• Enhanced compliance, ensuring workers receive their full legal entitlements, including salary, wages, and superannuation, in a timely manner.

Negatives of More Frequent SG Contributions

While the introduction of Payday Super brings more frequent superannuation payments, it can present challenges for businesses.

• Increased Cash Flow Pressure: More frequent superannuation payments can strain cash flow, especially for small businesses that may struggle to meet immediate financial obligations.
• Tighter Deadlines: Employers must make super contributions every time they pay wages, leaving less flexibility for managing expenses and increasing the urgency of cash flow management.
• Higher Administrative Burden: The shift to more frequent payments requires additional administrative tasks, which may lead to increased workload and complexity in payroll processing.

The onus will be on employers to ensure they meet the new SG contribution timelines. Taking action now and refining payroll processes can help businesses avoid penalties and improve employee satisfaction by ensuring super contributions are paid promptly.

Vehicle Depreciation Limits and Asset Write-Off Changes Tax Consequences

Recent changes to depreciation rules have impacted the immediate asset write-off thresholds. For the 2024 Financial Year onward, the immediate write-off limit has been reduced to $20,000, which means that deductions for new vehicles and other assets may be less favorable compared to previous years.

If you purchase a vehicle above the $20,000 threshold and have a turnover of less than $10 million, you will now need to depreciate the vehicle over several years or add it to the small business depreciation pool. The small business depreciation pool allows for an initial 15% deduction in the first year and 30% in subsequent years. Once the pool's written-down value falls below $20,000, the remaining balance can be claimed as a tax deduction. Adding a vehicle to the small business pool generally offers more substantial tax benefits than depreciating the asset over its effective life.

Example: A comparison of deductions between the small business depreciation pool and the effective life method shows that the pool provides a larger deduction in the earlier years, assuming you purchased the vehicle 28 June 2024:

Selling a Fully Depreciated Vehicle

When a fully depreciated vehicle is sold, it can have significant tax implications. If the vehicle was depreciated to a tax-written-down value (WDV) of nil, the entire sale price becomes taxable income.

If the vehicle was not fully written off for tax purposes, and the sale price exceeds the WDV, the difference is treated as taxable income. Conversely, if the vehicle is sold at a loss, the loss can be claimed as a deduction. For businesses that previously utilised the temporary full expensing method, selling a fully depreciated vehicle could result in a higher taxable income due to the entire sale price being added to the business’s taxable income.

Example:

• If a fully depreciated vehicle is sold for $20,000, that amount will be included in your taxable income.
• If the vehicle had a tax WDV of $15,000 and is sold for $20,000, the taxable income would be $5,000.

Additionally, if your business is registered for GST, you will need to account for GST on the sale of the vehicle.

It’s important to understand these rules to avoid any unexpected tax liabilities when purchasing or selling business vehicles. If you’re considering selling a fully depreciated vehicle, consult your accountant to ensure you’re aware of the potential tax consequences.

Do I need to pay WorkCover on Contractors?

Understanding the difference between a worker and a contractor is critical for WorkCover purposes because it directly impacts your legal obligations, including insurance premiums and claims liability. Misclassifying an employee as a contractor could result in significant financial consequences, such as underpaying insurance premiums, facing penalties, and being held responsible for unpaid entitlements or injury claims. Correctly identifying the employment relationship ensures compliance with WorkCover laws, protects your business from unexpected costs, and ensures that your workers are properly covered in case of workplace injuries.

WorkCover will be applicable on employees and subcontractors. Even if the contractor has an Australian Business Number (ABN) or is responsible for their own tax, if they are working under a ‘contract of service’ they’re still considered to be a worker and WorkCover will be applicable.

Determining whether a worker is a contractor, or an employee is not based on what the arrangement is called, but rather on the nature of the relationship.  Here is a little table to assist with determining the difference;

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